China and Demography Transition Effects

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Crossley and Worswick, 2000; Schultz, 1997) or even a positive effect on equality. Chu and Jiang (1997) examine the effects of age structure on family income using the Gini coefficient and the results demonstrate that changes in Taiwan’s demography reduced the inequality in family earnings between 1980 and 1990. By applying the Overlapping Families (OLF) Model, Lee and Mason (2003) find that population aging had little effect on income inequality. Morley (1981) expands Paglin (1975)’s method, which decompose the inequality by age structure and found that the younger age structure would widen the income inequality while the countries with serious population aging have a relative smaller inequality.

As the issue of population aging began to unfold at the beginning of the 21st century for developing countries, there are only a few existing studies on the relationship between demographic transition and income distribution that focus on developing world. China is among the few developing countries that have stepped into the aging population society. The researches on China’s demographic transition with income distribution are start to emerging in recent years and the results regarding this relationship are still not clear. Some empirical researches indicate that population aging expand the income inequality. Zhong (2011) investigates the relationship between population aging and income inequality in rural China by using the five years’ panel data from CHNS (China Health and Nutrition Survey) and argues that a significant portion of the sharp increase of income inequality at the beginning of this decade can be attributed to demographic change. Dong, et al (2012) employ provincial level panel data between 1996 and 2009 and confirm that population ageing is a positive and significant factor contributing to income inequality. But on the other hand, researches find that the demographic transition only account for a tiny fraction of inequality. Cai, et al (2010) adopt the urban household survey data between 1992 and 2003 by employing the regression based inequality decomposition and find that the age have a negligible effect on inequality. Qu and Zhao (2008) investigate the relationship between inequality and population aging in rural China based on the life cycle model. They use three years’ rural household surveys in China Household Income Project and apply analysis of variance and regression decomposition methods to decompose the consumption and income inequality in rural China into three parts: cohort effect, age effect and population aging effect. The results show that population aging only plays a small role on the inequality increasing in rural China. There are few other studies that have comprehensively analyzed the relationship between income distribution and problems associated with population aging in China

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